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Business Services Stocks' Q4 Earnings on Jan 29: TSS, RHI, XRX

Zacks Equity Research

The outlook for the business services sector is dependent on the health of the broader economy due to its widely-diversified nature.

The U.S. economy is benefiting from Trump administration’s business-friendly approach, including tax cuts and higher government spending which have aided manufacturing and non-manufacturing activities. Hence, demand for business services has remained in good shape.

The fourth-quarter earnings season has just begun, with only 13.8% of total business services companies having reported their earnings as of Jan 18, 2019, per the Earnings Preview report.

A key sector participant, IHS Markit Ltd INFO recently reported reported fourth-quarter fiscal 2018 earnings beat. The top and the bottom lines improved year over year.

The Zacks Business Services sector is expected to register earnings growth of 10.0% on 4.4% higher revenues in fourth-quarter 2018, per the above report. Additionally, the sector is one of the eight (out of the total 16) Zacks sectors expected to register double-digit earnings growth in fourth-quarter 2018. 

The sector has outperformed the Zacks S&P 500 composite over the past year. It has gained 0.9% against the S&P 500’s decrease of 6.5%.

 

Key Releases on Jan 29

Investors interested in the business services stocks can watch out for three companies that are scheduled to report their fourth-quarter 2018 numbers tomorrow.

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We do not recommend Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially if they have a negative Earnings ESP.

Based in Georgia, Total System Services, Inc. TSS provides payment processing, merchant, and related payment services to financial and nonfinancial institutions worldwide.

The Zacks Consensus Estimate for revenues is pegged at $968.62 million, indicating year-over-year decrease of 23.9%. The expected decrease is due to the application of Accounting Standards Codification (ASC) 606 that changed the gross versus net presentation of interchange and payment network fees.

The consensus mark for adjusted earnings is pegged at $1.06 per share, indicating year-over-year growth of 29.3%. The Tax Cuts and Jobs Act (which reduced corporate tax rates significantly) should boost the company’s bottom line.

Total System Services boasts an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with the average positive surprise being 7.1%.

Currently, the company has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. When we issued our earnings preview article, the company had a Zacks Rank #4.

Total System Services, Inc. Price and EPS Surprise

 

Total System Services, Inc. Price and EPS Surprise | Total System Services, Inc. Quote

Based in California, Robert Half International Inc. RHI provides staffing and risk consulting services.

The Zacks Consensus Estimate for revenues is pegged at $1.46 billion, indicating an increase of 8.2% year over year.

The top line is expected to benefit from growth in the company’s U.S. as well as non-U.S. staffing and Protiviti operations along with positive business sentiment across its small and mid-size client base. The consensus mark for earnings is pegged at 91 cents per share, indicating year-over-year growth of 40%. Lower tax rate is likely to boost the bottom line.

Robert Half boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with the average positive surprise being 5.5%.

Currently, the company has a Zacks Rank #3 and an Earnings ESP of 0.00%. When we issued our earnings preview article, the company had a Zacks Rank #4.

Robert Half International Inc. Price and EPS Surprise

 

Robert Half International Inc. Price and EPS Surprise | Robert Half International Inc. Quote

Based in Connecticut, Xerox Corporation XRX designs, develops, and sells document management systems and solutions worldwide.

The Zacks Consensus Estimate for revenues is pegged at $2.63 billion, indicating year-over-year decline of 4.2%. The expected decline is likely to be due to continued weakness in post-sale revenues that are dependent on machine sales and page volume.

The consensus mark for earnings is pegged at $1.16 per share, indicating year-over-year growth of 11.5%. The expected uptick is likely to be driven by cost savings and productivity improvements. (Read more: Xerox to Report Q4 Earnings: What's in the Cards?)

Xerox has a decent earnings surprise history, having surpassed estimates in two of the trailing four quarters, with the average positive surprise being 1.3%.

Xerox has an Earnings ESP of 0.00% and a Zacks Rank #3.

Xerox Corporation Price and EPS Surprise

 

Xerox Corporation Price and EPS Surprise | Xerox Corporation Quote

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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IHS Markit Ltd. (INFO) : Free Stock Analysis Report
 
Xerox Corporation (XRX) : Free Stock Analysis Report
 
Robert Half International Inc. (RHI) : Free Stock Analysis Report
 
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